KARACHI: The Bank of China on Wednesday was granted permission by the central bank to establish a domestic Chinese yuan (CNY) clearing and settlement set-up for the promotion of bilateral trade.
The State Bank of Pakistan validating its decision stating this was done to bolster the trade channels and remittance flows in CNY.
It added, “Bank of China can open CNY accounts of the banks operating in Pakistan to facilitate settlement of CNY based transactions such as remittance to and from China.”
In January, after signing Currency Swap Agreement (CSA) with People’s Bank of China (PBoC), SBP had taken a series of steps to promote the use of CNY in Pakistan for bilateral trade and investment with China. SBP allowed banks to accept CNY deposits and give CNY trade loans.
Also, BOC can extend services of providing yuan liquidity to the inter-bank market for settlement of CNY transaction, said SBP.
On the other hand, Industrial Bank of China (ICBC) has been permitted since 2015 by the central bank to offer local CNY settlement and clearing setup in Pakistan enabling it to open CNY accounts of the banks operating in Pakistan and to facilitate settlement of CNY based transactions such as remittance to/from China.
The central bank said efforts have been underway to enact policy measures to facilitate that exports, imports and financing transactions with China could be designated in CNY.
The introduction of this clearing and settlement system could assist in decreasing costs, improve efficiency for the domestic banks conducting transactions in CNY and improve market liquidity.
It would also enable settlement of rising trade and investment transaction between the two countries in CNY.
